Magma: getting products into the channel

I met Rajeev Madhavan, CEO of Magma, last week. We talked about a number of things but focused on one issue I’ve talked about before. Large EDA companies are capable of developing new technology—they have plenty of smart engineers, after all—but struggle to introduce new products into their channel. The reason is that their salespeople are rational and realize that they don’t want to be the first person to sell a new immature product. The trouble is that each salesperson making their own personal optimal decision isn’t optimal for the company since the product never matures or it gets to market too slowly to beat the competition. Startups don’t have this problem since they only have one product to sell and so their salespeople can’t sell other products while they are waiting for their colleagues to do the heavy lifting of maturing the product.

This dynamic is the reason that most new products are introduced by startups and then acquired by larger companies with bigger channels once there is market demand. But Rajeev admitted to me that they have had more success with internally developed products than with acquisitions, partly because he is outgunned financially and so cannot acquire startups that have established successful products.

Magma’s original BlastFusion product was introduced while Magma was still a startup, so that doesn’t count. But Magma has successfully introduced Finesim, a circuit simulator, and various analog products under the Titan umbrella. Rajeev claims that if Magma’s circuit simulation and analog product lines were a separate company, they would be the 5th biggest EDA company, larger than Atrenta and Apache who are both rumored to be around $40M in revenues.

I asked Rajeev how he had succeeded in getting his salespeople to sell new products. The answer turned out to be two-fold. Firstly, get some new salespeople. Magma turned over almost all of their salespeople to get a team that was up to addressing the problem. Then Rajeev had the team working on the new products report directly to him, and he would take them into accounts. Rajeev confessed that he actually learned this from Gerry Hsu. The salespeople didn’t always like it but the person they had to argue with was the CEO not some engineering director with no power. It takes that level of focus to get a new product into a channel with lots of alternative products to sell and renewals to book.

Rajeev told me he has been doing this with a soon-to-be-announced product and is hoping for similar success. I guess we’d better watch this space.

Interestingly, with Tekton, their new timing analyzer, he didn’t take this approach. Since Tekton is tied tightly enough into the mainstream place and route business, and since Synopsys can use PrimeTime as a weapon (somehow place and route plus PrimeTime doesn’t seem to cost much more than place and route alone) individual salespeople only needed tweaks to their commission plans to have them sell it aggressively. Apparently now 5 of the top ten semiconductor companies have it in qualification right now.

Talus, the follow-on to BlastFusion, was slow to get adopted. But this time it wasn’t a channel issue. As essentially the next version in an existing product line it shouldn’t require special focus. Rajeev admits that when it was first introduced a couple of years ago the 1.0 version had a lot of problems and was simply behind in routing technology, which took time to resolve.

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